Bank of Japan Holds Rates Steady

The Bank of Japan left its monetary policy unchanged Tuesday, signalling the central bank’s confidence it will meet its 2% inflation target.

The BoJ voted by an eight-to-one majority to stand pat, as expected, keeping the policy rate at -0.1% and the 10-year Japanese government bonds (JGB) yield target at 0%. The bank will continue to increase its holdings of JGBs by about JPY 80 trillion a year. It also left J-REIT and ETF purchase unchanged at JPY90 billion and JPY6 trillion, respectively

Board member Goushi Kataoka again opposed the decision to keep the interest rates unchanged, suggesting that if there was a delay in the timing of achieving the price stability target due to domestic factors, the central bank should take additional easing measures.

In its statement the central bank said, “Japan’s economy is likely to continue expanding on the back of highly accommodative financial conditions and the effects of the governments’s large scale stimulus measures, with overseas economies continuing to grow at a moderate pace, and maintain growth at a pace above its potential mainly through fiscal 2018. In fiscal 2019, the economy is expected to continue expanding, although the growth pace is projected to decelerate due to a cyclical slowdown in business fixed investment and the effects of the scheduled consumption tax hike.”

The Japanese yen was 0.02% down following the rate decision at around 113 against the U.S. dollar. The Nikkei was down 0.2% at 21,962 in afternoon trading

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